Follow the Sun

Solar power is reshaping energy production in the developing world. Across the developing world, solar power is hitting its stride. Rather than the rooftop panels popular in Germany, countries where solar irradiance is much stronger than northern Europe are creating vast parks with tens of thousands of flexible photovoltaic (PV) panels supplying power to their national grids. Some countries, such as China, provide generous subsidies (though these are sometimes years overdue). But in other countries solar PV is becoming competitive even without financial support.

In 2015 China surged past Germany to become the biggest producer of solar energy, benefiting from its dominance of solar-panel manufacturing and policies to reduce dependence on dirtier fuels, such as coal. Solar power accounts for just 3% of the electricity mix, but China is now building its biggest plant, in the Gobi desert. Analysts expect the country to install 12 gigawatts (GW) of solar in the first half of this year. That would be one-third more than the record amount America plans to build for the full year. Coal, meanwhile, is in growing trouble.

India is determined to keep up. Its government is targeting a 20-fold increase in solar-power capacity by 2022, to 100 GW. Though this might be over-ambitious, KPMG, a consultancy, expects solar’s share of India’s energy mix to rise to 12.5% by 2025, from less than 1% today. It thinks solar in India will be cheaper than coal by 2020. (Even Coal India, a mostly state-owned entity, plans to contract 1 GW of solar power to cut energy bills.) Such is the frenzy that officials in sunny Punjab are urging farmers to lease their land to solar developers rather than till it.

Led by big projects in these two countries, global solar-energy capacity rose by 26% last year. More remarkable is the decline in its cost. Studies of the “levelised cost” of electricity, which estimate the net present value of the costs of a generating system divided by the expected output over its lifetime, show solar getting close to gas and coal as an attractively cheap source of power. Auctions of long-term contracts to purchase solar power in developing countries such as South Africa, the United Arab Emirates, Peru and Mexico provide real-world evidence that such assumptions may even prove to be conservative.

In sunny places solar power is now “shoulder to shoulder” with gas, coal and wind. Since November 2014, when Dubai awarded a project to build 200 MW of solar power at less than $60 a megawatt hour (MWh), auctions have become increasingly competitive.